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SBA Released New PPP Loan Forgiveness Applications

Last Wednesday, the Small Business Administration and the U.S. Treasury released an updated version of the Paycheck Protection Act Forgiveness Application and, with it, a new “EZ” Application in response to calls for a less burdensome process for smaller borrowers.

The new EZ Form, which is only three pages long, is available only to self-employed borrowers with no employees and to businesses that did not reduce employee numbers between January 1, 2020 and the end of the Covered Period or reduce wages by more than 25% for any employee during that period.  Instructions for the form include the circumstances that qualify a borrower for use of the EZ Form.

The EZ Form FTE-reduction formula differs slightly from the formula used in the longer form.  To qualify for use of the EZ Form, a borrower must not have reduced FTE numbers between January 1, 2020 and the end of the Covered Period.  This differs from the forgiveness reduction calculation that allows the borrower to choose between two reference periods (either February 15-June 30, 2019 or January 1, 2020-Feb 29, 2020) to determine whether employee numbers were reduced.  If any FTE reductions were made since January 1, 2020, even if the 2019 comparison period would reach a different result, the borrower must use the longer forgiveness application form.  The safe harbors introduced by the PPP Flexibility Act still apply, however.

The Agencies also updated the long form, which new version can be found here: PPP Loan Forgiveness Application and its instructions here:  PPP Loan Forgiveness Application Instructions.   The long form has also been shortened, but that is partly due to the Instructions having been stripped from the application and made accessible as a separate document.  The Loan Forgiveness Application form was updated to incorporate the amendments of the Paycheck Protection Program Flexibility Act.

The revamped instructions have not changed the description of the amended Covered Period, leading us to confirm that the choice is binary:  either the borrower has a 24-week Covered Period or an 8-week Covered Period upon the borrower’s election if they took the loan prior to June 5, 2020.  Loans disbursed after June 5, 2020 have a 24-week Covered Period or a Covered Period ending on December 31, 2020, if that comes first.  While the PPP Flexibility Act arguably allows for a Covered Period to end at any point between 8 and 24 weeks and discussions with at least one Congressional delegate confirms that such flexibility was intended, the forgiveness documents demonstrate that the SBA is not implementing it in this way.  You must choose.  Note that no Covered Period extends beyond December 31, 2020.

Also important is the treatment of “paid and incurred” payroll costs calculation.  It appears that payroll paid the day after disbursement of a PPP loan for employee work that preceding the loan (in that first pay period) and payroll costs earned by your employees but paid after the end of the Covered Period (provided it is paid in the immediately following pay period) may both be included in your payroll costs calculation.  This should apply equally to non-payroll costs.  Mortgage interest and rent and utilities costs qualify as expenses during the Covered Period if they are paid or incurred during the Covered Period as long as the costs are, indeed, paid by the very next due date after the Period.  Be sure to discuss this with your accountant or counsel as you prepare your forgiveness application.  And be certain to submit your application no sooner than ten (10) months after the end of your Covered Period or it may be disallowed entirely.

We recommend reading the Loan Forgiveness Application Instructions carefully now as they comprehensively explain not only the calculations you and your lender will need to make and the data you will need to make them, but they also lay out the documentation you will need to create and retain to support the application.  Forewarned is forearmed, as they say.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program or SBA emergency economic injury disaster loans, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:  Chip Mason (, Cassandra LaRae-Perez (, Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC June 19, 2020

Changes to Nutrition Facts Label Coming January 2021

In 2017, the FDA completed the first sweeping update in more than 20 years of the nutrition facts label, changing the design of the label and the list of nutrients to be declared. In the context of the nearly 40% increase over those 20 years in the prevalence of obesity in the American population, it is unsurprising that the consumption of unhealthy fats and refined sugars lead the nutritional panel changes.

The FDA’s initial deadlines for compliance with the new nutrition labels initially fell in 2018, depending on the size of the manufacturer, but they were later extended so that larger food manufacturers had to get new labels on shelves by January 1, 2020 and food manufacturers with annual sales of less than $10 million have until January 1, 2021. Manufacturers of most single-ingredient sugars, like honey and maple syrup, and makers of certain cranberry products have until July 1, 2021 to apply the required changes to their labels.

We have been asked whether, in the light of a global pandemic, this is a hard deadline. The FDA has not yet announced an extension, but we would expect the Agency to provide considerable enforcement flexibility, considering this extraordinary time in which we find ourselves.  In 2019, in the absence of the interruptions that manufacturers face today, the FDA announced that they would provide six months’ “enforcement discretion” to larger manufacturers following their deadline.  The FDA has not yet announced a similar grace period for the coming “smaller manufacturers” deadline, but considering the pressures the pandemic has placed on all levels of manufacturing, it would be surprising if similar or greater flexibility were not also provided. Our advice: plan to hit the January 1, 2021 deadline if you can, but you will likely be granted flexibility if, due to the COVID-19 restrictions on packaging and label printing, you are unable to do so.

Note, too, that the FDA has provided some flexibility to food manufacturers who, because of supply chain disruptions, must make “minor formulation changes.”  Under certain circumstances, food makers may do so without having to change their labels. See that guidance here.

There is also a de minimis exception to the Nutrition Facts Label requirements: if you are a food manufacturer that sells fewer than 100,000 units a year and employs fewer than 100 people, you may be eligible for an exemption from the rule. You must, in that case, file a notice claiming your exemption. If you sell less than 10,000 units a year, however, you may be able to claim the exemption without providing such notice. An exemption may also apply if you produce a medical food or a food that contains an insignificant amount of all nutrients, like coffee.  There are strict requirements on what may be on your label in this case, so if you intend to rely on either of these or any other exemption, be sure to contact a labeling expert or your attorney to be certain you are eligible and take the appropriate steps.

How has the Nutrition Facts Label changed?  Highlights include:

  • A larger font to emphasize “calories” and “servings”;
  • An increase in serving sizes to reflect what people currently eat, but not what they should eat. This change may seem incongruous with the FDA’s goals, as consumers often confuse “serving size” on packaging for “recommended portion size.” The Nutrition Label and Education Act, however, requires that serving sizes be based on what people customarily eat in one sitting;
  •  A declaration of grams and a percent daily value for added sugars;
  • Dual columns to indicate “per serving” and “per package” calorie and nutrition information if a package contains more than one serving and if a consumer may reasonably be expected to consume the entire package in one sitting;
  • Daily values for sodium, dietary fiber and Vitamin D updated to comply with the 2015-2020 Dietary Guidelines for Americans;
  • Vitamin D and Potassium include the actual gram amount in addition to the percent Daily Value (%DV) because Americans are thought to be frequently deficient in both;
  • Vitamins A and C may be disclosed, but the disclosure is no longer mandatory, as deficiencies of these two vitamins are uncommon in Americans;
  • Calcium and iron %DV must still be included;
  • Calories from fat is no longer necessary (nor allowed), because the type of fat consumed is now believed to be more important than the amount of fat. Total fat, saturated fat and trans fat are still to be disclosed;
  • “Other carbohydrates” must also be excluded from the label; and
  • The footnote explaining %DV has been re-written.

Before we close, let’s talk for a minute about disclosing “added sugars”.  “Added sugars” are sugars that are “either added during the processing of foods, or are packaged as such, and include sugars, sugars from syrups and honey and sugars from concentrated fruit or vegetable juices that are in excess of what would be expected from the same volume of 100 percent of fruit or vegetable juice of the same type.” 21 C.F.R. 101.9(c)(6)(iii), if you feel like looking it up. Does that mean we must disclose “added sugars” on a jar of honey or a gallon of maple syrup? Well, yes. There was some uproar after the “added sugars” requirements were released. The 2018 Farm Bill introduced some protection of single ingredient products like maple syrup, but while maple syrup, honey and similar single ingredient products don’t have to include the gram amount of the sugars, they still have to disclose %DV for “added sugars.” Rather than including it in the nutrition label, it can be added to a † footnote within the nutrition label.

The FDA has posted a dizzying array of guidance documents, which can be found here. The most helpful are likely to be: The Final Rule and Guidance for Industry, which is current as of February 2020. Examples of the new label formats are found in both documents and here.

Gravel & Shea PC June 17, 2020

Main Street Lending Program Expanded Again, Now Permitting Smaller Loans, 5-Year Terms, and Principal Deferral for Two Years

This week, the Federal Reserve Board announced another expansion to the Main Street Lending Program (the “Program”), which is intended to allow more small and medium-sized businesses to receive Program loans.  The Program launch date has not yet been announced, but is expected soon.  When the Program does launch, it will be open to U.S. businesses with either 15,000 or fewer employees or $5 billion or less in 2019 revenue, which were in good financial condition before the onset of the COVID-19 pandemic.  Program applications will be accepted directly by participating lenders.

The most recent changes to the Program are:

  • reducing the minimum loan amount to $250,000 for New and Priority Loan Facilities (the minimum for Expanded Loan Facilities remains $10 million);
  • increasing the maximum loan limit (see details below);
  • extending loan terms from four years to five years;
  • deferring repayment of principal for an additional year, making principal repayable beginning in the third year (see details below); and
  • using the Main Street Special Purpose Vehicle to purchase 95% of each Program loan, reducing the risk to participating lenders.

The maximum loan size now differs for each of the three Program options:  New Loans, Priority Loans, and Expanded Loans.  The maximum loan size for a New Loan is the lesser of $35 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 4x the borrower’s adjusted 2019 EBITDA.  The maximum loan size for a Priority Loan is the lesser of $50 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 6x the borrower’s adjusted 2019 EBITDA.  The maximum Expanded Loan size is the lesser of $300 million or the amount that, in combination with the borrower’s outstanding and undrawn available debt, does not exceed 6x the borrower’s adjusted 2019 EBITDA.

The Program revisions not only defer principal repayment, but they also stack most of the principal repayment obligations towards the end of loan terms.  Principal repayment under all three types of loans will now be deferred for the first two years, and then 15% of the principal will be repaid at the end of year 3, 15% at the end of year 4, and 70% at the loan’s maturity date at the end of year 5.

Other portions of the Program—such as a one-year interest deferral, the use of a LIBOR + 3% interest rate, and the absence of loan forgiveness—remain unchanged.

Updated term sheets are available for each of the three Program loan types on the Federal Reserve website.  The following chart published by the Federal Reserve also provides a helpful summary of Program terms.

Source:  Federal Reserve Board

The Federal Reserve of Boston (the “Boston Fed”), which will administer the Program, released updated Frequently Asked Questions about the Program.  Standard lender and borrower forms are also available, but the versions currently posted here are in the process of being updated, so borrowers and lenders should wait and confirm that changes are complete before relying on the forms.  Borrowers are also reminded that lenders will prepare the final loan applications, which will incorporate the standard terms released by the Boston Fed.

Please refer to our original post and our last update on the Program for additional details, visit the Program webpage, or contact us for more information.

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For more information about the Main Street Lending Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC June 11, 2020

Congress Extends the Time Period During Which PPP Proceeds Must Be Spent and Relaxes Other Restrictions

Congress agreed late Wednesday night to relax the restrictions on certain Paycheck Protection Program requirements in its Paycheck Protection Program Flexibility Act of 2020.  (“Flexibility Act”).  The Act was signed into law by the President on Friday, June 5.

The Flexibility Act introduces the following changes to the PPP:

Repayment period extended.  PPP loans that are not forgiven are to be given a repayment period of at least five years after the deferment period, instead of the two year period earlier set by the SBA. Importantly, this provision applies only to loans made and disbursed after the date of this amendment, but it allows lenders to amend the loans they have already made, if they and the borrower mutually agree to do so.

Covered Period extended.  The “Covered Period,” that is, the period during which proceeds must be spent to be eligible for forgiveness, is extended.  The deadline by which a borrower must expend the proceeds and hire back workers or true up salaries is now either 24 weeks after the loan was disbursed, or December 31, 2020, whichever is earlier. The end of the period was June 30 under the original version of the Act.

Borrowers who received their loans before the passage of the Flexibility Act can still elect to have the covered period end after 8 weeks so that they can proceed with the forgiveness process.

Relief when employees elect not to return.  The amendment also provides relief for employers whose employees elect not to return before the end of the employee rehire period. If the employer was unable to rehire workers who were furloughed or laid off after February 15, 2020, either because the employee refused to return or for another reason, and if the employer was unable find similarly qualified employees to take their place before December 31, 2020, then those employee reductions will not reduce their forgiveness amounts. The circumstances must be thoroughly documented, however, to support this claim for relief.

Relief if safety requirements prohibit a full workforce.  Employers also get a break from forgiveness loss due to workforce reductions if they can document the inability to return to work to the same level of business activity because of social distancing, sanitation or other worker safety requirements, as long as those requirements are in keeping with guidance issued by the CDC, OSHA or the U.S. Department of Health and Human Services.

Only 60% of loan proceeds must be spent on payroll costs.  Borrowers can use more of the loan proceeds for expenditures other than payroll costs. Where the SBA required that 75% of the loan expenditures be for payroll costs, the Flexibility Act allows that 40% may be spent on other eligible costs and only 60% of the proceeds have to be used for payroll costs if a borrower wishes to seek forgiveness. See our March 26 Bulletin for a description of the costs that qualify as payroll costs; remember that they are greater than just wages, salaries and other cash compensation.

Payment period has changed for loans not forgiven.  The deferral of the payment period has changed as well. Where payment of loan proceeds remaining after forgiveness amounts were calculated were deferred for at least six months to a year, now payments are deferred until after the forgiveness calculation is determined and communicated to the lender, which would suggest that this period would be longer than 6 to 12 months. To qualify for this deferment however, a borrower must apply for forgiveness within 10 months of the last day of the Covered Period.  If they fail to do so, their payments must commence immediately following that 10 month period.

Payroll tax payment deferral restored to borrowers whose loans are forgiven.  Finally, where the Act originally denied the deferral of payroll taxes for any borrower who had their PPP loan forgiven, this restriction has been removed. PPP loan recipients whose loans are forgiven can benefit from the employer payroll tax delay provisions.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC June 5, 2020

Vermont Governor and Legislature Working to Finalize $400 Million Vermont Economic Recovery and Relief Package

Last week, Vermont Governor Phil Scott announced plans for a $400 million economic recovery and relief package for businesses and nonprofits throughout Vermont impacted by the coronavirus pandemic (the “Relief Package”).  The Relief Package, which will be funded with money the State of Vermont received from the CARES Act, is being developed jointly by Governor Scott’s Administration and the Vermont Legislature.  The Legislature will need to pass a bill approving the final Relief Package before funds will be available to aid the Vermont economy.  The information that follows describes the Relief Package as proposed by the Governor, but remains subject to change based on input from the Legislature.

The Relief Package includes two phases.  The majority of funds would be spent in Phase 1, which allocates $310 million across four main areas:

  • Financial assistance: $250 million in grants and loans to businesses and nonprofits
  • Housing assistance: $50 million in rent stabilization payments and homelessness reduction efforts
  • Technical assistance: $5 million in business restart and recovery assistance andmental health counseling and wellbeing resources
  • Marketing support: $5 million for promotional marketing assistance and grants to regional Vermont tourism groups.

The remaining $10 million of the Relief Package will be used in Phase 2.  Phase 2 is still under development, but programs may include additional financial assistance, broadband expansion, retraining programs for unemployed Vermonters, and permitting modernization.

Financial Assistance

The financial assistance portion of Phase 1 includes three programs:  (1) Emergency Action Grants; (2) Vermont Economic Injury Disaster Loan and Grant Program; and (3) Vermont Restart Loan and Grants.  According to representatives from the Agency of Commerce and Community Development (the “ACCD”) and the Vermont Department of Taxes, the three programs are designed to ensure that all Vermont businesses or nonprofits negatively impacted by the pandemic qualify for assistance from at least one program, subject to the availability of funds.

At $150 million, the Emergency Action Grants are the largest portion of the financial assistance program.  They will only be open to the food, accommodation, retail, and agriculture sectors.  $40 million is reserved for dairy farms grants, and $10 million for secondary dairy production businesses, such as cheese and ice cream makers.  Emergency Action Grants are designed to assist with paying fixed costs, such as rent, mortgage, existing loan payments, and inventory costs.

Emergency Action Grants will be open to businesses in the applicable sectors that have average annual revenue of $2.5 million or less, which experienced at least a 40% revenue decrease for any month between March and August 2020 (inclusive) relative to the same month in 2019 or 2018.  The published program details do not specify loan amounts, but in industry webinars, the ACCD said that grant amounts would equal 10% of the average quarterly revenue of a qualified business.  Under that formula, the largest grant available under the Emergency Action Grant program would be $62,500.

The Vermont Economic Injury Disaster Loan and Grant Program will be open to any Vermont business or nonprofit that saw significant revenue losses due to the pandemic, such as hair salons, theaters, and manufacturers.  This $80 million fund will be administered by the Vermont Economic Development Authority (“VEDA”), which will provide priority access to businesses and nonprofits that did not receive Emergency Action Grants.  Economic Injury Disaster Grants can be sought to cover three months’ of fixed costs during a partial or full shutdown due to COVID-19.  No cap on grant amounts or formula for determining the grants has been issued yet.  After grant funds are exhausted, loans of up to $150,000 will be offered.  The loans will have a 2% interest rate, with interest deferred for the first year, and repayment terms as long as 20 years.

The final financial assistance program, the Vermont Restart Loan and Grant Program, targets sole proprietors and businesses with less than $1 million in annual revenue and five or fewer employees.  It will make $20 million available to assist businesses by providing grants up to the lower of $15,000 or three months’ fixed cost expenses, or 5-year, 0% interest loans of up to $20,000.

All financial assistance funds in the Relief Package may be reduced or offset by Paycheck Protection Program funds or other federal coronavirus aid a business or nonprofit received.  Initial statements from the ACCD suggest that federal relief will only offset state relief if state funds are sought for the exact same purpose and federal funds fully satisfied that need (e.g. covered the full mortgage interest payment), but additional details are needed to clarify the offset rules.

Housing Assistance

The housing assistance fund will be divided into two pools:  a $42 million Rental Housing Stabilization Fund and an $8 million Re-Housing Recovery Fund.

The Rental Housing Stabilization Fund will provide residential property owners up to three months’ rent to cover rent and arrearages a tenant is unable to pay.  These payments will provide property owners the funds they need to pay their mortgages and maintain properties, as well as preventing the eviction and potential homelessness of tenants who are unable to pay rent.  The Rental Housing Stabilization Fund will be open to all residential property owners whose tenants are unable to pay rent or have rental arrearages.  Larger property owners do qualify, but only for payment on up to 20 rental units.

The Re-Housing Recovery Fund will provide emergency housing rehabilitation grants and forgivable loans to assist property owners with updating and repairing property.  This program will make up to 250 new housing units available to families and individuals currently experiencing homelessness.

Technical Assistance

The technical assistance component of the Relief Package is designed to offer businesses and employees that were greatly affected by state-mandated closures with technical support on safe, viable operations, and with mental and emotional support in trying times.

Technical assistance will include manuals with information about how to apply for grants off-line for those with limited internet access and how to help with new business issues, such as reconfiguring business layout to minimize close contact between patrons.  Professional service providers, such as software consultants and business turnaround experts who are selected by a state request for proposal, may also be available to advise eligible businesses and nonprofits on how to restart operations safely and efficiently.

In recognition of how stressful and uncertain the pandemic and rapid economic downturn is, the State of Vermont will also extend access to the Invest EAP Centers for Wellbeing employee assistance program to all businesses with 50 or fewer employees.  For three months, qualified businesses, their employees, and families will all be eligible to receive free mental health counseling (currently available by videoconference), plus resource referrals for a variety of issues, such as substance abuse, elder care, childcare, and family or workplace issues.

Marketing Support

The marketing support component of the Relief Package will include two main initiatives.  First, the state will make promotional materials available to local businesses, nonprofits, and communities to use for marketing themselves as a part of the statewide “Restart. Respect. Rediscover” marketing campaign. Second, there will be marketing and consumer stimulus grants available to help chambers of commerce, downtown districts, and similar regional tourism groups spur consumer spending.  Grant recipients may receive a menu of promotional packages to choose from, such as a gift card match program, to help infuse funds into their local economy.

Additional details on the proposed Relief Package are available here.  The Scott Administration hopes to pass a final Relief Package in early June, and to begin disbursing funds as early as July.  We will monitor for updates, and provide new information, applications, and guidance as they become available.

Click here to read COVID-19 News and Updates

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For more information about the Vermont Economic Recovery and Relief Package, please contact your attorney at Gravel & Shea PC or Heather Hammond ( or Catherine Burke (

Gravel & Shea PC May 27, 2020

Paycheck Protection Program Loan Forgiveness Application Released

The Small Business Administration (the “SBA”) has released the Paycheck Protection Program (“PPP”) loan forgiveness application (the “Forgiveness Application”).  The Forgiveness Application, SBA Form 3508, is available here.

PPP borrowers must submit Forgiveness Applications and all required documentation to the lenders who disbursed their PPP loans in order to obtain loan forgiveness.  There is currently no deadline for submitting Forgiveness Applications, but a borrower cannot submit its Forgiveness Application until at least eight weeks after its PPP loan was disbursed, because of the need to list and document covered expenses from the eight-week period following the loan disbursement.  In the case of borrowers who received more than one loan disbursement, the eight-week period begins on the date of their first PPP loan disbursement.

The PPP provides borrowers until June 30th to bring their employment levels and employee wages to pre-pandemic levels before their loan forgiveness amounts are reduced to reflect reductions in headcount or wages.  Borrowers with fewer employees now than during the base period or who have reduced the wages of any employee who earned $100,000 or less by more than 25% should wait until after June 30th to complete their Forgiveness Applications.  For most borrowers, the base period is either February 15-June 30, 2019 or January 1-February 29, 2020, but see this post for more information about the base periods for seasonal employers.

When a borrower is prepared to begin its Forgiveness Application, we recommend completing it in the following order:

  • collect documentation listed on page 10 (and be sure to retain copies for 6 years after loan forgiveness or full repayment);
  • complete PPP Schedule A Worksheet or get a report that provides that information from your payroll system or payroll processor;
  • complete PPP Schedule A;
  • complete PPP Loan Forgiveness Calculation Form;
  • optional step: complete PPP Borrower Demographic Information Form; and
  • complete and sign the certification/signature page.

Costs eligible for loan forgiveness are:  payroll costs, mortgage interest payments, rent payments (for real estate and leased business equipment or other personal property), and utility payments (including electricity, gas, water, transportation, telephone, or internet access) of the business for the 8 weeks after the loan was disbursed.  Mortgages, lease agreements, and utility services must predate February 15 for those expenses to be eligible for forgiveness.  Remember that payroll costs include other items besides salaries and wages, but that forgivable cash compensation is capped at $15,385 per employee (which equals 8 weeks of a $100,000 salary). Borrowers may also count commissions and tips; payment for vacation, sick or family leave not covered by other coronavirus tax relief credits; dismissal or separation payments; employer payments of group health care costs, including health insurance premiums; employer payments of retirement benefits; and payments of state and local taxes on employee wages.  The Forgiveness Application includes a calculation to ensure that at least 75% of total forgiven costs are eligible payroll costs.

Although the loan forgiveness period is only eight weeks long, it covers both actual expenditures paid in that timeframe and costs incurred during those eight weeks but paid on or before the next regular payroll date or due date for a mortgage, rent, or utility payment.  Employers who pay biweekly or more often may elect to count their payroll costs from the first pay period after the eight-week period begins to the date eight weeks later, instead of pro-rating between pay periods, but should use the actual eight-week period following immediately after disbursal for other covered expense calculations.

The Forgiveness Application includes instructions for reducing loan forgiveness based on reductions in full-time employee equivalents (“FTEs”) or reductions of more than 25% in any employee’s salary or wages relative to the base period.  It also explains several exceptions to the FTE reduction rules.  If a former employee refused an equivalent offer of rehire, or if an employee was fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in hours, the borrower may still include that employee in its FTE calculation, unless a new employee who filled the post has been counted instead. Employees who earn more than $100,000 per year are excluded from the reduction in loan forgiveness based on wage reductions.

The SBA may instruct lenders to disapprove a Forgiveness Application if it does not include all requested documentation or if the SBA determines that the borrower was not eligible for the PPP loan it received.  The SBA may also request additional information for purposes of determining loan forgiveness, and failing to provide that information could result in a denial of the loan forgiveness request.  The SBA is permitted to review borrower documentation related to PPP loan forgiveness for up to six years after a PPP loan is forgiven or repaid in full, so borrowers should retain copies of all relevant documents, even those that did not need to be submitted with the Forgiveness Application, such as documentation of rejected rehire offers.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (, Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC May 19, 2020

SBA Announces That Borrowers of PPP Loans of Less than $2M Will Benefit from Presumption of Good Faith When Certifying Need and Borrowers of Larger Loans Will Have an Opportunity to Correct Before Facing Enforcement

When applying for PPP loans, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes [the] loan request necessary to support the ongoing operations of the Applicant.”  In recent weeks, additions to the U.S. Treasury FAQs cast doubt that small businesses owned by larger concerns and businesses owned by private equity firms or hedge funds could make the certification of need in good faith, notwithstanding their eligibility under the size requirements.

This, followed by the recent announcement by the Small Business Administration that it would conduct a full audit of any PPP loan of more than $2 million, sent small companies holding smaller loans scrambling to consider the risk of the audit, even if their need was genuine.

The Small Business Administration and the U.S. Treasury today issued an FAQ extending an automatic safe harbor to borrowers receiving PPP loans with an original principal amount of less than $2 million. These borrowers “will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” The SBA states that “borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”

The FAQs can be read here. The document itself is not new, but new FAQs are periodically added to the end.

Borrowers that received PPP loans for amounts over $2 million may also be able to certify in good faith their need for the loan, but they will be subject to review and, likely, full audits by the SBA for compliance with program requirements, including the certification of economic need.  In prior communications, the SBA threatened sanctions if such need was determined to been improperly claimed, but the SBA now states that even larger borrowers will have a chance to make corrections before facing sanctions.  “If the SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notifications from SBA, SBA will not pursue administrative enforcement. . . .”

The deadline for borrowers with access to other sources of capital to return the funds has been extended to Monday, May 18 to provide borrowers additional time to determine if they qualify for the new $2 million safe harbor.

Click here to read COVID-19 News and Updates

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC May 13, 2020

Governor Scott Opens Outdoor Recreation and Outdoor Fitness Facilities

On May 6, 2020, Governor Scott issued Addendum 13 to his Executive Order, which declared a state of emergency in Vermont in response to COVID-19.  Addendum 13 allows Vermonters to socialize and recreate in groups of 10 or fewer, so long as physical distancing and health protocols are followed.

Additionally, Addendum 13 allows businesses that offer outdoor recreation and outdoor fitness activities that require low or no direct physical contact to begin operations.  These include parks, recreation associations, trail networks, golf courses, tennis, skate parks, boating, photography and guided expeditions.  These businesses must implement the following measures:

  1. Require an “arrive, play and leave” mentality.  No congregation before or after activities.
  2. Post signs and institute registration processes that reinforce that that the businesses are only open to Vermonters or those from out-of-state who have quarantined for 14 days.
  3. Post signs discouraging contact games.
  4. Eliminate services that result in person-to-person interactions.
  5. Reduce high contact surface areas such as waiting areas, picnic tables, play structures and rental shops.
  6. Offering only rental equipment that can be disinfected between users.
  7. Close indoor facilities that require in-person transactions.
  8. Open restrooms only if they can be regularly cleaned and disinfected.

Businesses must follow the Restart Guidance provided by ACCD, including all training and safety plan requirements.

The Addendum became effective on May 7, 2020, and updated guidance from ACCD can be found here:

Click here to read COVID-19 News and Updates


Please contact Heather Hammond ( at Gravel & Shea PC if you have questions or would like assistance.

Gravel & Shea PC May 11, 2020

May 6, 2020: Main Street Lending Program Expansion Includes Some Larger Businesses and the Addition of a New Loan Facility

On April 30, the Federal Reserve Board announced the expansion of the Main Street Lending Program (the “Program”).  The Program, which has not yet launched, is designed to provide credit to businesses struggling with the fallout of the coronavirus pandemic but which are either too large to be eligible for Paycheck Protection Program (“PPP”) loans or still have unmet funding needs even after receiving a PPP loan.  Our original post on the Program is available here.  Please note that certain eligibility rules and loan terms have changed, as outlined below.

When the Program opens, interested businesses can apply for full-recourse, non-forgivable loans or loan expansions directly from eligible lenders.  The Federal Reserve has not announced a Program start date or released a list of eligible lenders.  It has, however, stated that it will release the names of borrowers, the amounts they borrow, interest rates, and other Program details.

The Program expansion involved creating a new loan facility—the Main Street Priority Loan Facility (the “MSPLF”)—and expanding eligibility for the Main Street New Loan Facility (the “MSNLF”) and Main Street Expanded Loan Facility (the “MSELF”).

The expanded eligibility opens all Program loans to businesses that either have up to 15,000 employees or $5 billion or less in annual revenue (increased from 10,000 employees and $2.5 billion in revenue).  Employees and revenue are both calculated on an aggregate basis with affiliated businesses.  The minimum loan size for the MSPLF and MSNLF was reduced from $1 million to $500,000, but a $10 million minimum applies to the MSELF.  In response to public comments, the Program will no longer using SOFR to set interest rates.  Interest rates for all three loan types will be set to equal LIBOR + 3%, but loan contracts should explain what rate will apply if LIBOR rates are no longer published during the term of the loan.

MSPLF loans can range in size from $500,000 to the lesser of $25 million or the amount that, when added to a borrower’s outstanding and undrawn available debt, does not exceed six times the borrower’s adjusted 2019 earnings before interest, tax, depreciation, and amortization (“EBITDA”).  MSPLF loans (like MSNLF and MSELF loans) will have four-year terms, with payments deferred for the first year.  For MSPLF loans, 15% of the principal will be due at the end of years 2 and 3, and a balloon payment of 70% of the principal will be due at maturity.  Lenders will retain a 15% share of MSPLF loans.  Borrowers will pay lenders an origination fee of 100 basis points, and lenders may also pass on the 100 basis point transaction fee charged by the Federal Reserve to borrowers.

The Program requires borrowers to “make commercially reasonable efforts to retain employees” during the term of Program loans.  There is no set percentage of employees that must be retained, but borrowers must demonstrate good-faith efforts to comply with this requirement, in light of their need for labor, resources, and the overall economy.

Term sheets for each of the Program’s loan facilities are available here, along with FAQs about the Program, which include details about restrictions on stock repurchases, capital distributions, and repayment of other loans during the term of Program loans.  A chart summarizing the terms of each loan facility is also available here.

The Program is not open to nonprofits.  However, likely in response to comments received on the initial Program details, the Federal Reserve Board stated that it “recognizes the critical role that nonprofit organizations play throughout the economy and is evaluating a separate approach to meet their unique needs.”

Click here to read COVID-19 News and Updates

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For more information about the Main Street Lending Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC May 6, 2020

May 6, 2020: New PPP Guidance Extends Safe Harbor Repayment Date, Caps Loans to a Corporate Group, Expands Eligibility for Loan Forgiveness, and Includes Non-US Resident Employees of Foreign Affiliates When Evaluating Business Size

The Treasury Department continues to issue new guidance related to the Paycheck Protection Program (“PPP”).  The latest developments include:  the PPP safe harbor loan repayment deadline has been extended to May 14; loans are capped at $20 million per corporate group; and certain laid-off employees who refuse offers to be rehired do not reduce their employers’ headcounts for loan forgiveness purposes.

The Treasury Department previously clarified that PPP borrowers must certify, in good faith, that “‘[c]urrent economic uncertainty makes this loan request necessary to support the[ir] ongoing operations”, considering their access to other sources of liquidity.  Borrowers who applied for a PPP loan before April 24 and fully repaid their loans by May 7, 2020, would be deemed to have made that certification in good faith.  On May 5, the Treasury Department extended that safe harbor repayment date to May 14, 2020.  (See question #43 here.)

A new interim rule released on April 30 also limits each corporate group to no more than $20 million in PPP loans, regardless of the loan amounts for which individual businesses in the corporate group otherwise qualify.  For this rule, all businesses that have the same direct or indirect majority owner are in a common corporate group, even if those businesses are not treated as affiliated businesses for purposes of counting employees on their PPP loan applications.  The $20 million cap went into effect on April 30, and applies to all PPP loan applications pending or submitted on or after that date, as well as to loans that were only partially disbursed as of April 30.

Applicants must notify their lenders if they applied for or received a PPP loan that does or could push the total received by their corporate group to over $20 million.  Those loan applications must be cancelled or withdrawn or the loans repaid.  (The interim rule did not provide the option of amending a loan application to reduce the total PPP loan requested by a corporate group to $20 million.)  Retaining a loan that violates the corporate group limit counts as an unauthorized use of PPP loan funds, making the loan ineligible for any forgiveness.

Although the corporate group rule could reduce loan forgiveness for some borrowers, FAQ #40 could increase loan forgiveness for others.  Section 1106(d)(2) of the CARES Act reduces the amount of PPP loan forgiveness borrowers are eligible for if the average number of full-time employees they have or the total salaries and wages they pay eight weeks after the loan is disbursed dip below the numbers from their base period.  However, the new guidance says that if a laid-off employee refuses an offer of rehire by its employer, as long as that offer was for the same salary/wages and hours the employee had before, the employee headcount is not treated as lower for purposes of reducing that employer’s loan forgiveness amount.

FAQ #44 makes a significant change to the SBA Interim Final Rule for any applicant business that has a foreign-based affiliate or affiliates. The SBA Interim Final Rule released April 2 and the early FAQs released by the U.S. Treasury (FAQ #3) made clear that a business “is eligible for a PPP loan if it has 500 or fewer employees whose principal place of residence is in the United States.”  This led many to conclude that employees of foreign affiliates who are resident outside the United States are not counted for the purposes of PPP eligibility. FAQ #44 sweeps those employees back into the count by requiring that for the purposes of the 500-or-fewer employees size standard, an applicant must count not only the employees of its U.S.-based affiliates, but also the employees of affiliates based overseas.

Any qualified business, nonprofit, sole proprietor, or veteran or tribal organization seeking a PPP loan should apply as soon as possible to ensure that funds are still available.  These financial institutions can accept PPP applications.

New PPP guidance is issued regularly, so please check our COVID-19 news page or ask your attorney for updates.

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For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (,  Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (

Gravel & Shea PC May 6, 2020